Value chain
4 min read

Empowering the value-chain, satisfying the customer

Despite an abundance of Kiwi ingenuity, the rate of commercial success for medical innovations is, unfortunately, quite abysmal. Learn why being focussed on the needs of your entire value chain is essential for commercial success.
Written by
Dan Hansen
Published on
January 16, 2024

As New Zealanders we are a nation enamored with innovation. We are not content to accept the status quo and instead strive to find new and improved methods to resolve even the most mundane of problems. This penchant for progress extends to the realm of healthcare as well, where countless technologies and products are developed by those who have firsthand experience with the issues they seek to address.

Despite this abundance of ingenuity, the rate of commercial success for medical innovations is, unfortunately, quite abysmal. Some estimates suggest that as many as 90% of these innovations will ultimately prove to be unfruitful from a commercial standpoint. One of the primary reasons for this lamentable state of affairs is a narrow definition of a company's "customer." Innovators must understand that their "customers" encompass all members of the value-chain, and not simply the end user.

approximately 90% of innovations will fail to be commercially successful.

Everybody in the chain is your customer

In healthcare, as in any complex system, there exists a wide array of players all contributing to the successful adoption of new technologies. These include clinicians, administrative staff, insurance companies/payers, and patients/caregivers. To navigate this labyrinthine landscape and achieve lasting and sustainable sales, an in-depth understanding of all those who play a role in the care pathway, along with a comprehension of the challenges they face, is essential. This, in essence, is validation. A solution that addresses the needs of all these players, rather than focusing solely on the end user, is more likely to be embraced and less likely to be displaced by new entrants in the future.

The perspective of manufacturers owning the value-chain (pull-through) is common to the retail space but is relatively rare in healthtech and engineering. The goal of pull-through is for manufacturers to take responsibility for driving end-user purchasing rather than leaving it to distributors, retailers, and others to serve the customer. Because of this, when we speak to businesses wishing to validate their products with potential customers we encourage them to include all those who contribute to the product getting to the end-customer. This includes the distributor, the referrer, the provider, the insurance companies/payers and the end customer.

Your customer is anybody who influences your end-customer to purchase your product

Innovator to end-customer

Validation needs to be along the entire value-chain and care pathway

Validation that focuses on only one or two players in the care pathway will likely miss the insight needed to create pull-through. For instance, US-based hospital bed manufacturer Hills-Rom Co. sought to understand how they could help a hospital to grow profit – the desired outcome for businesses. They interviewed clinicians and patients across departments, even to the point of volunteering as ward orderlies to better understand their customer. What they discovered was nurse time, while a leading cost for the hospital, was often devoted to menial and non-nurse required tasks, such as fetching items that have fallen from beds and changing the TV station. Recent research also uncovered that nurses and nurse assistants ranked second for occupations with the greatest number of musculoskeletal disorders. Hills-Rom Co. then sought to design a bed which alleviated the need for menial nurse tasks and reducing muscular strain, and thus reducing unnecessary cost. Here four clinical roles contributed to the creation of a solution; the nurses, the patients, insurance companies (WorkSafe etc) and the hospital accountants.

What might a pull-through programme look like?

In the example above, Hills-Rom Co. could also engage with nurses’ unions to develop and promote nurse and nurse-assistants’ wellbeing in their hospital network. Likewise, Hills-Rom Co. could create an education programme for ways to reduce nurse injuries when moving or assisting patients. A significant benefit of these programmes is the proximity companies have to their market; allowing companies to stay in touch with their customers, notice any market changes and maintain the customer insight needed to sustain innovation.

Mapping the care pathway helps to identify marketing opportunities along the value-chain

Sleep apnea machines are typically administered by sleep clinics throughout NZ, however patients often go through a series of steps to reach the final provider. For instance, a patient may experience snoring which keeps their wife up at night, she then impresses on her husband to go to the GP; the GP inspects him and decides to refer him on to ABC sleep clinic where your product is eventually sold by the clinician. Now there are multiple referrers and chains in this link which must be considered to drive pull-through. Unless the wife refers her husband to the GP, no products are sold, and unless the GP chooses your option over alternatives like medication, no products are sold; and if the GP doesn’t know how to find a trusted and competent clinician to refer his patients to, no products are sold.

Example of pull-through

A savvy innovator may market to the key patient’s wife with sleep apnea improvements, particularly around improving sleep, educate the GP around the benefits of sleep apnea machines and provide an opportunity for GP’s to get their highly sought-after CPD hours up. To drive referrals to your clinics, innovators may work with the GPs to find highly qualified and experienced clinicians who work at partner sleep clinics.

6 steps to get started

  1. Map out your care pathway

  2. Identify those who influence the patient from presentation to recovery

  3. Who are your most influential customers – don’t forget your patient’s wife

  4. Interview these ‘customers’ to determine their challenges, anxieties and desired outcomes

  5. Identify areas of friction or difficulty on behalf of your customers

  6. Innovate around how you could solve your ‘customers’ problems and alleviate friction.

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